Brussels, 04/09/2015 (Agence Europe) - The European Parliament's economic and monetary affairs committee will try to reach agreement in September if possible on reform of the banking sector.
No official meetings have yet been scheduled between the negotiators of the political groups, a sign that the summer break did not manage to reach any great breakthrough in this domain. Informal discussions took place, mainly between rapporteur Gunnar Hökmark (EPP, Sweden) and the S&D group's negotiator, Jakob von Weizsäcker (of Germany). The presence of Financial Services Commissioner Jonathan Hill in Strasbourg next week may provide an opportunity to examine the state of play in the various negotiating positions although no meetings have yet been planned. A vote had been hoped for at the EP's committee in mid-September, and could take place on Wednesday 23 September.
A parliamentary source said that there hadn't been any major changes, and the German social democrat was taking a hard-line approach. People at the European Commission said that von Weizsäcker thought he had won and would now wait for the EPP group to make a move in his direction.
At the end of May, the EP's committee failed to adopt a negotiating position on the level of discretion to be given to the member states' authorities when it comes to prudential measures to be taken to protect the retail side of big banks that take excessive trading risks (see EUROPE 11322). In the form it was amended durng the vote, the draft Hökmark report gave supervisory bodies the choice of the most appropriate decisions to take, including greater capital requirements and possible legal separation of retail and investment banking. It was rejected at the committee by a single vote, with the S&D clashing with the EPP, ALDE and ECR.
Among the amendments initially lodged, the S&D group left it for national regulatory bodies to decide on prudential measures to be applied in the event of excessive risk-taking, but it reversed the burden of proving the existence of excessive risk-taking by asking the banks in question to demonstate that their commercial model was not a danger to financial stability.
Potential negotiating options. In order to reconcile the various forces, a proposal on prudential measures to be taken in the event of excessive risks to the market (Article 10) was circulating in the early summer. Under this proposal, which this newsletter has seen, the banks in question would have been given a second opportunity to demonstrate that their business model was not excessively risky. Moreover, the introduction of extra capital requirements could be postponed for three years from the date when an excessive risk is detected, and the exact amount of capital to be required would be defined in an implementation measure for the future regulation.
At the Council, where the member states decided on a negotiating position in June (see EUROPE 11339), there is very little room for manoeuvre. The Luxembourg Presidency of the Council of Ministers believes the draft legislation can only be improved if it goes back to the drawing board. Above all, recommending automatic separating off of different types of banking in the event of excessive risk-taking could cause a real problem for the member states, although an equally radical position defended by the Greens/EFA, GUE/NGL and ENF has little chance of being adopted at the European Parliament.
Among the various compromise options with the EP, the Luxembourg Presidency feels it would be possible to oversee the prudential measures by delegating powers to the European Banking Authority (EBA). It might also be possible to play with the degree of detail for the quantitative and qualitative criteria for deciding on excessive risk-taking. For example, additional capital requirements would apply if three of the five criteria were met, and if all five criteria were met, then more intrusive measures would be possible, including the separation of different types of banking.
Another controversial aspect of the talks between Council and EP is the fate of proprietary speculation. Unlike what was laid down in the draft report rejected by the EP's committee, the Council would not ban proprietary trading, but would simply hive it off. (Mathieu Bion)